Corporate Restructuring

Strategies
Prepared By
Sushil Kumar
Sourabh Malhotra
Sumit Sharma
Gaurav Verma

Corporate Restructuring
Process by which a firm does an analysis of itself and alters what it owes
and owns, refocuses itself to specific task of performance improvements

Involves activities to make more balanced and profitable

It is a structured decision making exercise undertaken to evaluate the

current endowments of company , and fine tuning of the available skills ,
machinery , and technology to meet the challenges of tomorrow

Restructuring Involves

Sale of underutilized assets , such as patents or brands

Outsourcing of operations such as payroll and technical support to a more efficient

third party

Moving of operations such as manufacturing to lower cost locations

A major public relations campaign to reposition the company with consumers

Reorganization of functions such as sales, marketing and distribution

Essentials of Restructuring
Ensure the company has enough liquidity to operate during
implementation of a complete restructuring

Produce accurate working capital forecasts

Provide open and clear lines of communication with creditors who mostly
control the companys ability to raise the financing

Detailed business plan and considerations

Reasons for Restructuring

Change in fiscal and government policies

Concept of Customer Delight
Cost Reduction

Divestment

Core Competencies

Information Technology Revolution

Liberalization, Privatization & Globalization (LPG)

Enhancing shareholder value

Consistent growth and profitability

Restructuring capital structure

Bifurcation of Business

Types of Restructuring

Financial Restructuring

Portfolio Restructuring

Organizational Restructuring

Financial Restructuring
Involves change in the capital structure and capital mix of the company to
minimize its cost of capital

Also involves infusion of financial resources to facilitate mergers,

acquisitions, joint venture, strategic alliances

Depends on availability of free cash flows, takeover threats faced by the

company and concentration of equity ownership

Types of financial
restructuring

Debt restructuring:When a company is in

crisis, it may try to renegotiate with its creditors
to reduce or eliminate some of its debts. Faced
with the possibility that the distressed company
may default on a loan, creditors will often work
to adjust the terms of repayment, including
lowering interest rates and/or extending the
repayment schedule. Debts may also be forgiven,
in part, often in exchange for the creditor
gaining some equity part ownership in the
company.

Equity Restructuring:Companies that have

little debt in comparison to their equity that
is, they are are underleveraged or have a low
debt-to-equity ratio may use some of their
equity to buy back stock. This returns more
control to the company, which will have fewer
stockholders to satisfy and pay dividends to. If
the company has excess cash, it can use it to
repurchase shares; alternatively, if it doesn't
have extra cash available, it may sell off some
assets that are not bringing in profits or borrow
money for the buyback.

Financial Restructuring
Purpose

Generating cash for exploiting available investment opportunities

Ensure effective use of available financial resources

Change the existing financial structure , in order to reduce the cost of

capital

Leveraging

the firm

Preventing

attempts of hostile takeover

Portfolio Restructuring
Involves divesting or acquiring a line of business perceived peripheral to
the long term business strategy of the company

Represents

the companys attempt to respond to the marketing needs

without losing sight of its core competencies

Portfolio Restructuring
Purpose

Restructuring as a result of some strategic alliance

Responding to shareholders desire to downsize and refocus the

companys operations

Responding to outside boards suggestion to restructure

Responding to strategies adopted as a response to exercising call or put

options

Organizational Restructuring
Restructuring strategy designed to increase the efficiency and
effectiveness of personnel, through significant changes in the organizational
structure

Is a response changes in the business and related environments.

Takes the form of divestiture and acquisitions

Strategies for Restructuring

Includes
Hardware Restructuring
Software Restructuring

Hardware Restructuring : Focuses on

Identifying the core competencies of the business
Flattening the organizational layers to improve organizational
responsiveness
Initiating downsizing to reduce excess workforce reduction in overheads
Benchmarking against the toughest competitors in order to adopt best
practices

Strategies for Restructuring

Software Restructuring
Involves cultural and process changes, in order to establish a collaborative
environment that facilitates growth and restructuring
Focuses on
Adopting an open and transparent communication mechanism
Building an environment of guidance and coaching
Building an environment of trust
Raising the aspiration levels of individuals
Empowering people & encouraging decentralized decision making
Helping individuals develop foresight, i.e. understanding changes and getting ready
for the anticipated changes
Training people to accept new ideas and challenging assignments

Strategies Options in
Corporate Restructuring
Adopting an open and transparent communication mechanism
Process of eliminating existing inefficiencies
Aims at
Improving operations
Alter the relative strength of the organization to face competition
Facilitate creating of competitive advantage
Provide better customer satisfaction
Generate profits in a free market economy
Help the organization differentiate itself from competitors
Ensure it delivers value to the customers

Implications of Corporate
Restructuring
Investors
Represent individuals, institutions and companies that have financial
stake in the company
Investors concerned about immediate future and long-term returns
Restructuring generates severe financial implications and this creates
insecurity and uncertainty in the minds of the investors
Customers
Restructuring often results in reallocation of resources, introduction of
new products or withdrawal of the existing products, changes in the after
sales policy of the company, etc.

Implications of Corporate
Restructuring
Customers
Often result in erosion of customer base and confidence and adversely
affect future business prospects
Focus on the needs and expectations of the customer by providing quality
products and reducing the lead time needed
Management
Restructuring results in changes in business processes, introduction of
changes that suit change in processes, changes in systems and in ensuring
effective communication with all the stakeholders

Implications of Corporate
Restructuring
Management
Helps release financial resources blocked in unproductive assets and low
return assets and businesses
Provides an opportunity to the management to prove its ability to manage
the change
Employees
Restructuring impacts them psychologically, culturally and
materialistically

Implications of Corporate
Restructuring
Employees
Creates fears in their mind leading to psychological turmoil
Patterned Mindset, makes acceptance of new set of challenges difficult
Involves unlearning old skills and acquiring new skills

Thank you !